Making Tax Digital (MTD) is a government initiative that's been talked about for a while now. Its aim is to modernise the UK tax system by moving to digital records and more frequent submissions. You may have heard about MTD for VAT, which has already come into effect for all VAT-registered businesses since April 2022. Now, a similar scheme for Income Tax is on the horizon.
For many sole traders and landlords, these changes will mean a new way of managing their tax. So, it's natural to ask: am I affected by MTD? This guide will help you understand if these changes apply to your business and what you need to do to get ready.
What is Making Tax Digital?
MTD is the government’s plan to make tax administration more efficient and to help businesses reduce errors. The core idea is to move away from paper-based record keeping and annual tax returns to a more digital, up-to-date system. This new process involves keeping digital records and submitting updates to HMRC through approved software.
The next major phase, MTD for Income Tax (IT), is set to begin its rollout from April 2026. This will affect a lot of self-employed people and landlords across the country, so it's important to understand if you fall into the new system.
How do I know if I'm affected?
Whether you're affected by MTD for IT depends on a key factor: your annual qualifying income.
Qualifying income: This is the total gross income from your self-employment and/or property before any expenses are taken out. This is often referred to as your turnover.
The rollout of MTD for IT is happening in a phased approach based on this income, which means the date you need to comply depends on how much you earn.
From April 2026: MTD for IT will apply to you if your total qualifying income from self-employment and/or property is over £50k for the 2024 to 2025 tax year.
From April 2027: This will be extended to include individuals with a qualifying income over £30k.
From April 2028: The government has confirmed an extension to £20k from April 2028.
If your qualifying income is below these thresholds, you're not required to join MTD for IT for now. However, you can still choose to sign up voluntarily if you'd like to get ahead of the curve.
What if my income goes up and down?
The MTD rules look at your qualifying income from a specific tax year to decide when you need to comply. For the first phase of MTD in April 2026, HMRC will look at your income from the 2024 to 2025 tax year (your self assessment return is due on 31 January 2026). If it’s over £50k, you'll need to start following the MTD rules from April 2026.
Once you have started with MTD, you can only exit after three consecutive years below the threshold (and by claiming exemption), not automatically.
What do I need to do for MTD?
If you discover that you are affected by MTD for IT, there are three main changes you'll need to make to your current process.
1. Digital record keeping You'll need to move away from paper-based systems and keep a digital record of all your business income and expenses. This has to be done using software that is compatible with MTD.
With a Mettle business bank account, you can get FreeAgent accounting software included*. The FreeAgent app is MTD-compliant and helps you keep a digital record of your transactions. By syncing your bank account directly, FreeAgent can automatically pull in all your business income and spending, giving you a clear, up-to-date view of your finances**. This makes sure every detail is ready for HMRC, without the need for manual data entry.
2. Quarterly updates Instead of one annual tax return, you'll be required to submit a summary of your income and expenses to HMRC every three months.
Your MTD-compatible software will automatically pull together the information you need from your digital records, making these submissions a simple 'check and send' process. FreeAgent, for example, generates these quarterly reports for you based on the data in your Mettle account. This makes staying on top of your submissions straightforward and efficient.
The deadlines for these quarterly updates are:
7 August
7 November
7 February
7 May
3. An end-of-year declaration You'll still need to submit a final declaration at the end of the tax year. This is similar to the self assessment process you might already be familiar with and allows you to make any final adjustments, add other income (like from a PAYE job) and get your final tax bill. The deadline for this is 31 January.
What these changes mean for you
Moving to MTD might feel like a big step, but it can actually be a really positive thing for your business. The new process can give you:
More control and confidence: Instead of a yearly tax scramble, you'll have an up-to-date view of your finances throughout the year. This helps you understand what's happening with your business and how much tax you might owe, so you're not hit with any surprises.
Fewer errors: Digital record keeping and automated software reduce the risk of human error. This helps you get your tax right and avoid any potential penalties.
More time to focus on your business: With the right software, MTD can help automate a lot of the bookkeeping and tax admin, freeing up your valuable time to focus on the things you love about your business.
To get MTD-ready, the most important step you can take is to start keeping digital records and using MTD-compatible software now. You can get ahead of the curve by opening a Mettle account and getting FreeAgent included to help you start your digital journey***.
*To get FreeAgent for free, customers have to make at least one transaction a month from their Mettle account. If they don’t make one transaction a month, or if their Mettle account is closed and they continue to use FreeAgent then the FreeAgent fees will apply.
**As long as your transactions are categorised, and receipts added to create a clear picture of your businesses position.
***Eligibility criteria apply. Mettle and FreeAgent have optional paid-for features available.
The content of this blog is based on our understanding of the topic at the time of publication and should not be taken as professional advice. Any of the information may be subject to change. You are responsible for complying with tax law and if in doubt, should seek independent advice.
Blog correct as of: 18 August 2025
